Northwest Natural pany(NWN) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2022, the company reported a net loss of $19.6 million or$ 0.56 per share, an improvement from a net loss of $20.7 million or$ 0.67 per share in Q3 2021, reflecting an improvement of $0.11 per share [17] - For the first nine months of 2022, net income was$ 38.4 million or $1.14 per share, compared to$ 38.1 million or $1.24 per share for the same period in 2021, indicating a slight increase in net income [19] - Utility margin increased by$ 6.6 million due to customer growth, new rates in Washington, and colder weather in 2022 compared to 2021 [20] Business Line Data and Key Metrics Changes - The gas utility contributed $300,000 of higher earnings related to increased margin and lower pension expense in Q3 2022 [18] - The water and wastewater utilities experienced over 3% growth over the last 12 months, with Texas posting nearly 11% organic growth [12] - The collective gas and water utility customer base grew by 5.3%, including recent acquisitions [12] Market Data and Key Metrics Changes - Unemployment in Oregon was 3.8% in September 2022, with the housing market moderating from its highs in 2021 [8] - The median sales price of homes decreased by approximately 4.7% in Q3 2022, while the inventory of homes for sale in the Portland Metro area remained tight at only 2.2 months of supply [9] Company Strategy and Development Direction - The company is committed to environmental stewardship and is focusing on integrating renewable natural gas and hydrogen into its operations [24] - An integrated resource plan was filed with Oregon and Washington commissions to outline long-range resource plans and pathways to reduce emissions [25] - The company is actively pursuing renewable natural gas projects and has closed its largest acquisition to date in Arizona, indicating a focus on growth in the water and wastewater sector [33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving financial results in line with previous guidance and noted that economic conditions are being carefully monitored [6][8] - The company reaffirmed its 2022 earnings guidance for net income in the range of$ 2.45 to $2.65 per share, assuming continued customer growth and average weather conditions [23] - Management highlighted the importance of innovation and collective action in addressing climate change, with ongoing projects in hydrogen blending and carbon capture [24][62] Other Important Information - The Oregon Public Utility Commission approved a revenue requirement increase of$ 59.4 million effective November 1, based on a 50-50 capital structure and an ROE of 9.4% [13] - The company announced a dividend increase for the fourth quarter, marking the 67th consecutive year of annual dividend increases [35] Q&A Session Summary Question: Broader aspirations for hydrogen projects - Management believes in the potential of different hydrogen products and aims to decarbonize the existing gas utility system by integrating hydrogen [39][40] Question: Impact of consolidation in the RNG market - Management sees consolidation as a reaffirmation of their strategy and believes it will allow them to focus on smaller projects while larger companies pursue bigger transactions [43][44] Question: Activity in the water business - The water sector is experiencing a steady pipeline of activity, with recent tuck-in acquisitions indicating ongoing growth [45] Question: Details on the RNG tracker from the rate case - The RNG tracker allows for investments in renewable natural gas assets to be incorporated into rates annually, with a lag in implementation [46][47] Question: O&M expenses outlook - Management indicated that O&M expenses have been managed effectively, with expectations for them to level off for the remainder of the year [64][66]